Kyabram Property Investments Pty Ltd v Murray [2006] NSWSC 54 | Case summary

5219/05 KYABRAM PROPERTY INVESTMENTS PTY LTD v WENDY JILL MURRAY JUDGMENT - Ex Tempore (revised 14 February 2006) 1 HIS HONOUR: On 24 November 2005 Palmer J gave judgment in this matter: Kyabram Property Investments Pty Ltd & Anor v Murray [2005] NSWSC 1202. The plaintiffs had sought rectification of two mortgages which the defendant had granted to them - one mortgage to one plaintiff, the other to the other plaintiff. Each of those mortgages said that it related to certain identified Real Property Act titles of land. The plaintiffs contend that each mortgage document should be rectified, so as to refer in addition to certain land which was not specifically identified in the mortgage. That additional land was old system land, in relation to which qualified certificates of title had issued. 2 His Honour upheld the plaintiffs' contention and ordered the rectification of the mortgages. Order 7 made by Palmer J required, among other things, the defendant to deliver to the solicitor for the plaintiffs such of the original deeds of conveyance together with qualified titles of the land which had been omitted from the mortgages, by 10 December 2005. 3 The parties attempted to carry out Order 7. The title documents had been lodged with a bank in Tamworth. There is a receipt, signed by someone on behalf of that bank in October 1994, which acknowledges receipt of the documents. However, when the bank was asked for the documents, the reply was that it appeared that the file had been sent for destruction. There is no basis on the evidence for doubting that the documents in question have been destroyed, and so Order 7 cannot be carried out. 4 Another of the orders which Palmer J made was an order granting liberty to apply. It is in exercise of that liberty to apply, counsel for the plaintiff has applied today for the Court to make orders under section 138 of the Real Property Act 1900, requiring the Registrar-General to issue new folios in the register, and to record in the new folios the interest of the plaintiff as mortgagee, and where the respective interests of the plaintiff lie in priority in relation to each other. Correctly, the plaintiffs exercised the liberty to apply by filing a Notice of Motion in the proceedings which Palmer J has heard: Kraft v Kupferwasser (1991) 23 NSWLR 236 at 244; Clark Equipment Credit of Australia Ltd v Como Factors Pty Ltd (1988) 14 NSWLR 552 at 559. 5 Those orders are opposed, on the ground that an appeal has been lodged against the decision of Palmer J. This has been done by filing a Notice of Appeal without appointment. Thus, there is no formulation, by a lawyer, of the grounds of appeal which are intended to be advanced. I have received in evidence from the defendant a statement of the matters which are of concern to her concerning the judgment. It may be that those, or some of those, will form the basis of grounds of appeal eventually. 6 The lodging of an appeal does not of itself operate as a stay of orders which are made by a trial judge. Unless and until the order of a trial judge is overturned on appeal, it is a valid order, and must be obeyed. 7 Liberty to apply, which had been reserved by his Honour's order, can in some circumstances involve granting to a party to proceedings the right to come back to Court to deal with problems which arise in the practical carrying through of an order which has been made. That is the nature of the plaintiff's application before me today. Order 7 was a machinery provision which aimed to give the plaintiffs a proper title to the interest in land which the mortgages, as ordered to be rectified, conferred. That machinery has, unexpectedly, failed to produce the intended result. It is within the scope of liberty to apply, concerning the orders for rectification, for the plaintiffs to return to Court to seek alternative machinery for giving them a proper title. In saying that, I do not intend to suggest that liberty to apply cannot be used for any purpose other than working out a practical problem in an order that has been made: cf Daniell's Chancery Practice, 7th ed, p 628-9, Kraft v Kupferwasser (1991) 23 NSWLR 236 at 243-4; Radmanovich v Nedeljkovic [2002] NSWSC 212. 8 In my view, the fact that an appeal has been lodged does not provide any reason why the practical difficulty which has emerged in the carrying through of Palmer J's orders should not be straightened out. If the plaintiff were to make an application for a stay of the orders of his Honour, it would be a matter for the Court of Appeal to consider whether such a stay was appropriate, and, perhaps, if a stay was appropriate, the terms on which it might be granted. I say nothing about either of those topics. The application before me today is merely to enable the practical difficulty in the implementation of Palmer J's order to be overcome. 9 The application is made under section 138 Real Property Act 1900. It provides: "(1) A court may, in proceedings for the recovery of any land, estate or interest from the person registered as proprietor of the land, make ancillary orders of the kind set out in subsection (3), if the court is of the opinion that the circumstances of the case require any such order to be made. (2) A court may, in proceedings for the possession or production of a certificate of title or in proceedings in which the court makes a determination as to an estate or interest in land, make ancillary orders of the kind set out in subsection (3), if the court is of the opinion that the certificate of title has not been, or is not likely to be, produced by a person for the purposes of the registration of a dealing affecting the land concerned. (3) A court may order the Registrar-General to do one or more of the following: (a) cancel or amend a folio of the Register, (b) cancel, amend or make a recording in a folio of the Register, (c) create a new folio of the Register, (d) issue a new certificate of title. (4) The Registrar-General must give effect to any such order. (5) A court that makes an order under this section may order that a person deliver a certificate of title or other instrument to the Registrar-General for the purpose of giving effect to any such order. (6) An action does not lie against the Registrar-General for recovery of damages sustained through deprivation of land, or any estate or interest in land, because of compliance by the Registrar-General with an order under this section. (7) In this section: court does not include a Local Court or a tribunal." 10 The proceedings, insofar as they sought rectification of the mortgages, are ones "in which the court makes a determination as to an estate or interest in land", within the meaning of section 138(2). Thus it is open to the Court to make an order of the type referred to by section 138(3). 11 While in terms section 138(3) gives a wide discretion on the Court, it is appropriate to bear in mind, in exercising that discretion, practical difficulties which might arise from there being in existence two duplicate certificates of title relating to the same parcel of land. It is also a wise practical guideline that the power under section 138 should usually be exercised only if there is no other way of solving the particular problem which has presented itself. 12 In Lank v Lank (1973) 21 FLR 384, at 387, Allen J referred, with apparent approval, to a submission of counsel that the Court should be concerned to protect the integrity of the registration system and of the register, to avoid if possible the inconvenient situation which might arise from the existence of two duplicate certificates of title in respect of the same parcel of land, and to assist the registrar in his duty to protect the assurance fund of claims under section 127. See also Botterill v Botterill [2000] NSWSC 1152; (2000) 10 BPR 18,787. 13 In Bull v Wimble [2004] NSWSC 528; (2004) 12 BPR 22,223 Barrett J had before him an application not only to make an order that a new certificate of title be issued, but that a new folio of the register be created, and a new certificate of title issued for that new folio. His Honour referred, at [11] to the risks inherent in two duplicate certificates of title being in circulation and continued: "But the process the order envisages curtails very significantly the risk of that consequence rebounding to the detriment of any innocent party. This is because the creation of a new folio of the register in place of the existing folio (which will be cancelled) and issue of a new certificate of title in respect of that new folio in the names of the plaintiffs means that anyone tempted to proceed on the faith of the old certificate in the name of the defendant will, merely by conducting the simple search routinely undertaken as the first step in any conveyancing transaction, discover immediately that that certificate of title no longer represents land in any folio of the register." 14 It is that type of order which is sought in the present case. In my view, in light of there being no other way suggested in which the plaintiffs could get a marketable title to the interest which Palmer J has held them entitled to, the evidence suggesting that the old title documents have been destroyed, and the precaution which the orders embody of seeking the creation of new folio of the register as well as the issue of new certificates of title, this is an appropriate case to make the orders which are sought. 15 The plaintiffs seek an order for indemnity costs of the present application. The mortgage contains, in clause 14 of the memorandum to it, a covenant to the following effect: "In addition to all costs expenses and other moneys which the Mortgagor may be liable at law or in equity to pay in respect of or in relation to this Mortgage the Mortgagor will upon demand pay to the Mortgagee … all moneys paid or expenditure incurred by the Mortgagee for or in connection with … this mortgage or any security collateral hereto or with their preparation or completion … or in or incidental to the exercise or attempted exercise of any right power authority or remedy conferred on the Mortgagee under or by virtue of this … security and the same shall be a charge upon the mortgaged premises and be deemed moneys hereby secured and bear interest accordingly and the expression 'costs' shall mean and include Solicitor and own client's costs as well as party and party costs and costs of and incidental to the preparation execution stamping and enforcement of this Mortgage …" 16 Mr McKell, for the defendant, opposes the making of an order for indemnity costs. He says, and with considerable justification, that the problem which has arisen in the execution of the order of Palmer J is not a problem created by the defendant, and indeed that it is a problem to which the plaintiffs have possibly contributed to some extent, by not ensuring that they adequately investigated the title situation at the time of taking their own mortgages. 17 However, those considerations are, given the basis on which the application for indemnity costs is made, beside the point. The jurisdiction which is being invoked here is the jurisdiction of the Court to make an order for costs on a basis other than the usual party/party basis in circumstances where there is a contractual agreement that costs will be dealt with other than on the usual party/party basis. When there is such a contractual entitlement to costs on a different basis, the Court will usually give effect to that contract, by its own order for costs: Gomba Holdings (UK) Ltd v Minories Finance Ltd (No 2) [1993] Ch 171; Leda Holdings Pty Ltd v Oraka Pty Ltd [1999] FCA 444; Rayner and Anor v Australia and New Zealand Banking Group Limited [2003] WASCA 264 at [25]-[26] per Murray and Parker JJ; Rumball & Ors v Mortimore [2000] WASC 126 per Owen J at [15]-[17]. It was considerations like these which led Palmer J, in his judgment of 24 November 2005, to make an order for costs of those proceedings on an indemnity basis: Kyabram Property Investments Pty Ltd & Anor v Murray [2005] NSWSC 1202 at [29]. 18 It is because contracts are concerned with the allocation of risk, that it is appropriate for the Court to give effect to the contractual arrangement between the parties. Even though it might not be the fault of the defendant that the extra costs have been incurred, nonetheless the circumstances which led to the incurring of these costs are within the scope of the risks that she has undertaken, by the mortgage, to bear. 19 I order the defendant to pay the costs of today's application on the indemnity basis. 20 As a fallback position, Mr McKell submits that I should stay my own orders for a period of 7 days. I am not inclined to do so. An application for stay of the orders of Palmer J - which were made as long ago as 24 November 2005 - can be made to the Court of Appeal, and such an application can, if made, also extend to an order for stay of my orders. I would not, however, regard it as appropriate to stay my own orders, when an application for stay has not yet been made to the Court of Appeal of the order of Palmer J. 21 The orders of the court are:

Kyabram Property Investments Pty Ltd v Murray

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